DALLAS, Dec. 10, 2020 (GLOBE NEWSWIRE) -- Dave & Buster's Entertainment, Inc., (NASDAQ:PLAY), ("Dave & Buster's" or "the Company"), an owner and operator of entertainment and dining venues, today announced financial results for its third quarter 2020, which ended November 1, 2020.
The Company’s third quarter 2020 financial results continued to be severely impacted by the effects of the COVID-19 pandemic when compared against results of the third quarter of 2019. The Company began the third quarter with 84 open stores, or approximately 60 percent of its total store base. As of November 1, the Company had 104 open stores, or approximately 75 percent of its total store base. All stores open during the quarter operated under reduced hours and capacity limitations as dictated by each jurisdiction.
Key Third Quarter 2020 Highlights (all comparisons to third quarter 2019)
- Revenues totaled $109.1 million compared with $299.4 million
- Comparable store sales declined 66% (includes all comp stores, whether open or closed)
- Of the 114 stores in the comp store base, an average of 74 were open and fully operational during the quarter, which had an average sales index of 57% compared to the prior year. A total of 67 fully operational comp stores were open at the beginning of the quarter and 77 were open at the end of the quarter
- Net loss totaled $48.0 million, or $1.01 per share (47.6 million shares), compared with net income of $0.5 million, or $0.02 per diluted share (31.5 million diluted shares)
- EBITDA loss totaled $21.7 million compared with EBITDA of $39.8 million
- Adjusted EBITDA loss totaled $16.0 million compared with adjusted EBITDA of $46.3 million
- Executed a private offering of $550 million 7.625% senior secured notes due 2025, including modifications to certain debt covenants through 2022 and a term extension on the current credit facility to August, 2024
- Ended the quarter with $314 million of availability under the Company’s revolving credit agreement, net of a $150 million minimum liquidity covenant and $10 million in letters of credit
- Weekly cash burn rate during the third quarter (excluding effects of the October notes offering) averaged $2.4 million
Brian Jenkins, Dave & Buster’s Chief Executive Officer, said, “During the third quarter we made significant progress safely re-opening stores while refining and implementing numerous initiatives that are accelerating our business recovery and positioning us for long-term success. Our sales recovery at re-opened stores peaked in late October at a 68% index compared to last year, with the top quartile of stores reaching a 91% index. Combined with the team’s continued discipline around our lean operating model, we achieved positive store-level EBITDA at 68 stores in the third quarter and 80 stores in the month of October.
Mr. Jenkins concluded, “We believe our strong sales recovery through late October and return to store-level profitability at the majority of our re-opened stores clearly illustrates the resilience of the Dave & Buster’s brand and validates our plan for navigating through this unique environment. However, we expect our fourth quarter sales and profitability will be significantly impacted by the recent resurgence of COVID cases and resulting operating limitations imposed by local jurisdictions. Despite this temporary setback, our resilient and committed team, our focused plan, enhanced liquidity, and our strong brand put us in position to bounce back quickly when the threat of COVID begins to subside.”
Third Quarter 2020 Results
(All comparisons are between third quarter 2020 and third quarter 2019, unless otherwise noted)
Total revenues of $109.1 million declined 63.6% from $299.4 million. Comparable store sales declined 66% for the third quarter. By month, comparable store sales were down 75% in August, down 62% percent in September and down 59% in October. Non-comparable store third-quarter revenue totaled $20.1 million compared with $40.1 million.
Operating loss totaled $56.0 million, or (51.4)% of revenues, compared with operating income of $6.5 million, or 2.2% of revenues.
Net loss totaled $48.0 million, or $1.01 per share (47.6 million share base) compared with net income of $0.5 million, or $0.02 per diluted share (31.5 million diluted share base).
EBITDA loss totaled $21.7 million, or (19.9)% of revenues, compared with EBITDA of $39.8 million, or 13.3% of revenues.
Adjusted EBITDA loss totaled $16.0 million, or (14.6)% of revenues, compared with adjusted EBITDA of $46.3 million, or 15.5% of revenues.
Store operating loss before depreciation and amortization totaled $7.3 million, or (6.7)% of revenues, compared with store operating income before depreciation and amortization of $60.3 million, or 20.1% of revenues.
Balance Sheet, Liquidity, Cash Flow and Capital Allocation
On October 27, 2020, the Company completed a private offering of $550 million 7.625% senior secured notes due November 2025, which included modifications to certain debt covenants through 2022 and a two-year term extension on the current credit facility to August, 2024. Proceeds of the offering were used to repay all amounts previously outstanding under its term loan facility and to partially repay drawings under its revolving credit facility, the undrawn portion of which will be available to be drawn in the future for general corporate purposes, subject to its specific terms.
Also during the third quarter, under provisions of the 2020 CARES Act the Company received a tax refund of approximately $10 million.
The Company ended the third quarter with approximately $8 million in cash and equivalents and $314 million available capacity under its revolving credit facility, net of its $150 million minimum liquidity covenant and $10 million in letters of credit. Total long-term debt totaled $576 million, consisting of $550 million in recently issued senior secured notes and $26 million outstanding under the revolving credit agreement.
Over the past six months, in addition to the notes offering mentioned above, the Company secured additional liquidity in the form of two equity offerings totaling $182.0 million. In light of these developments and the Company’s projected cash flows from operations, the Company believes it has alleviated the substantial doubt about the Company's ability to continue as a going concern, and the Company has sufficient liquidity to satisfy its obligations over the next twelve-month period.
Fourth Quarter Business Update
The recent resurgence of COVID cases has resulted in renewed operating limitations imposed by local jurisdictions, several store reclosures, and further delays in the Company’s ability to re-open its California and New York stores, which represent approximately 25% of historical annual sales. As a result, during the first five weeks of the fourth quarter through December 6, 2020, the Company’s sales recovery has moderated, including:
- Overall comparable store sales decline of 71%
- Sales index of approximately 49% across an average of 71 open comp stores
- The net reclosure of 15 stores due to local mandates and one new store opening, leaving 90 stores open, or 65% of the chain
- Reduced operating hours for currently open stores
For the month of November, these conditions resulted in sales of approximately $32.6 million, including a 69% decline in overall comparable store sales, and an EBITDA loss of approximately $11.0 million, equating to an average weekly EBITDA burn rate of approximately $2.7 million.
The Company currently anticipates that the trend of COVID cases and resulting actions by local jurisdictions to limit operations or re-close stores will intensify over the balance of the fourth quarter, and that re-opening its California and New York stores will be delayed until early 2021. These conditions will be especially impactful to the Company’s December sales and profitability, a month in which it has historically benefited from high foot traffic and a robust special events business.
As a result, the Company expects further erosion in fourth quarter comparable store sales and EBITDA, including the following anticipated cost pressures:
- Increased store labor costs, reflecting the Company’s decision to recall key store leadership positions to maintain talent and to ensure store restart capabilities
- Increased repair & maintenance costs
- Above-normal spoilage costs due to prolonged closures
- Reduction of rent abatements due to expiration of landlord agreements
- Increased G&A costs reflecting the recall of select positions
Quarterly Report on Form 10-Q Available
The Company’s Quarterly Report on Form 10-Q, will be available at www.sec.gov and at the Company’s investor relations website, contains a thorough review of its financial results for the third quarter ended November 1, 2020.
Investor Conference Call and Webcast
Management will hold a conference call today at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). The conference call can be accessed over the phone by dialing (720) 543-0214 or toll-free (888) 254-3590. A replay will be available after the call for one year beginning at 7:00 p.m. Central Time (8:00 p.m. Eastern Time) and can be accessed by dialing (412) 317-6671 or toll-free (844) 512-2921; passcode 9070022.
Additionally, a live and archived webcast of the conference call will be available under the Investor Relations section at www.daveandbusters.com.
About Dave & Buster’s Entertainment, Inc.
Founded in 1982 and headquartered in Dallas, Texas, Dave & Buster's Entertainment, Inc., is the owner and operator of 139 venues in North America that combine entertainment and dining and offer customers the opportunity to "Eat Drink Play and Watch," all in one location. Dave & Buster's offers a full menu of entrées and appetizers, a complete selection of alcoholic and non-alcoholic beverages, and an extensive assortment of entertainment attractions centered around playing games and watching live sports and other televised events. Dave & Buster's currently has stores in 40 states, Puerto Rico, and Canada.
Forward-Looking Statements
The Company cautions that this release contains forward-looking statements, including, without limitation, statements relating to the impact on our business and operations of the global spread of the novel coronavirus outbreak. These forward-looking statements involve risks and uncertainties and, consequently, could be affected by the uncertain and unprecedented impact of the coronavirus on our business and operations and the related impact on our liquidity needs; our ability to continue as a going concern; our ability to obtain waivers, and thereafter continue to satisfy covenant requirements, under our revolving credit facility; our ability to access other funding sources; the duration of government-mandated and voluntary shutdowns; the speed with which our stores safely can be reopened and the level of customer demand following reopening; the economic impact of the coronavirus and related disruptions on the communities we serve; our overall level of indebtedness; general business and economic conditions, including as a result of the coronavirus; the impact of competition; the seasonality of the Company's business; adverse weather conditions; future commodity prices; guest and employee complaints and litigation; fuel and utility costs; labor costs and availability; changes in consumer and corporate spending, including as a result of the coronavirus; changes in demographic trends; changes in governmental regulations; unfavorable publicity, our ability to open new stores, and acts of God. Accordingly, actual results may differ materially from the forward-looking statements, and the Company therefore cautions you against relying on such forward-looking statements. Dave & Buster's intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more appropriate information becomes available, except as required by law.
*Non-GAAP Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses the following non-GAAP financial measures: EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, Store operating income before depreciation and amortization, and store operating income before depreciation and amortization margin (collectively the "non-GAAP financial measures"). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of our operating performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP measures used by the Company in this press release may be different from the measures used by other companies.
(Financial Tables Follow)
| DAVE & BUSTER'S ENTERTAINMENT, INC. | ||||||
| Condensed Consolidated Balance Sheets | ||||||
| (in thousands) | ||||||
| ASSETS | November 1, 2020 | February 2, 2020 | ||||
| (unaudited) | (audited) | |||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 8,341 | $ | 24,655 | ||
| Other current assets | 84,051 | 54,322 | ||||
| Total current assets | 92,392 | 78,977 | ||||
| Property and equipment, net | 846,056 | 900,637 | ||||
| Operating lease right of use assets | 1,050,878 | 1,011,568 | ||||
| Intangible and other assets, net | 395,735 | 378,957 | ||||
| Total assets | $ | 2,385,061 | $ | 2,370,139 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Total current liabilities | $ | 287,427 | $ | 290,865 | ||
| Operating lease liabilities | 1,277,794 | 1,222,054 | ||||
| Other long-term liabilities | 51,251 | 54,881 | ||||
| Long-term debt, net | 561,815 | 632,689 | ||||
| Stockholders' equity | 206,774 | 169,650 | ||||
| Total liabilities and stockholders' equity | $ | 2,385,061 | $ | 2,370,139 | ||
| DAVE & BUSTER'S ENTERTAINMENT, INC. | |||||||||||||
| Consolidated Statements of Operations (Unaudited) | |||||||||||||
| (in thousands, except share and per share amounts) | |||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | ||||||||||||
| November 1, 2020 | November 3, 2019 | ||||||||||||
| Food and beverage revenues | $ | 38,346 | 35.2 | % | $ | 124,637 | 41.6 | % | |||||
| Amusement and other revenues | 70,706 | 64.8 | % | 174,715 | 58.4 | % | |||||||
| Total revenues | 109,052 | 100.0 | % | 299,352 | 100.0 | % | |||||||
| Cost of food and beverage (as a percentage of food and beverage revenues) | 10,664 | 27.8 | % | 33,384 | 26.8 | % | |||||||
| Cost of amusement and other (as a percentage of amusement and other revenues) | 7,244 | 10.2 | % | 18,796 | 10.8 | % | |||||||
| Total cost of products | 17,908 | 16.4 | % | 52,180 | 17.4 | % | |||||||
| Operating payroll and benefits | 27,704 | 25.4 | % | 76,165 | 25.4 | % | |||||||
| Other store operating expenses | 70,783 | 64.9 | % | 110,713 | 37.1 | % | |||||||
| General and administrative expenses | 11,746 | 10.8 | % | 16,210 | 5.4 | % | |||||||
| Depreciation and amortization expense | 34,384 | 31.5 | % | 33,340 | 11.1 | % | |||||||
| Pre-opening costs | 2,570 | 2.4 | % | 4,245 | 1.4 | % | |||||||
| Total operating costs | 165,095 | 151.4 | % | 292,853 | 97.8 | % | |||||||
| Operating income (loss) | (56,043 | ) | -51.4 | % | 6,499 | 2.2 | % | ||||||
| Interest expense, net | 8,213 | 7.6 | % | 6,110 | 2.1 | % | |||||||
| Loss on debt refinance | 904 | 0.8 | % | - | 0.0 | % | |||||||
| Income (loss) before benefit for income taxes | (65,160 | ) | -59.8 | % | 389 | 0.1 | % | ||||||
| Benefit for income taxes | (17,117 | ) | -15.7 | % | (93 | ) | -0.1 | % | |||||
| Net income (loss) | $ | (48,043 | ) | -44.1 | % | $ | 482 | 0.2 | % | ||||
| Net income (loss) per share: | |||||||||||||
| Basic | $ | (1.01 | ) | $ | 0.02 | ||||||||
| Diluted | $ | (1.01 | ) | $ | 0.02 | ||||||||
| Weighted average shares used in per share calculations: | |||||||||||||
| Basic shares | 47,613,741 | 30,980,878 | |||||||||||
| Diluted shares | 47,613,741 | 31,515,454 | |||||||||||
| Other information: | |||||||||||||
| Company-owned stores at end of period | 137 | 134 | |||||||||||
| Store operating weeks in the period | 1,221 | 1,722 | |||||||||||
| The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown: | |||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | ||||||||||||
| November 1, 2020 | November 3, 2019 | ||||||||||||
| Net income (loss) | $ | (48,043 | ) | -44.1 | % | $ | 482 | 0.2 | % | ||||
| Add back: Interest expense, net | 8,213 | 6,110 | |||||||||||
| Loss on debt refinance | 904 | - | |||||||||||
| Benefit for income taxes | (17,117 | ) | (93 | ) | |||||||||
| Depreciation and amortization expense | 34,384 | 33,340 | |||||||||||
| EBITDA | (21,659 | ) | -19.9 | % | 39,839 | 13.3 | % | ||||||
| Add back: Loss on asset disposal | 124 | 458 | |||||||||||
| Impairment of long-lived assets | - | - | |||||||||||
| Share-based compensation | 2,999 | 1,747 | |||||||||||
| Pre-opening costs | 2,570 | 4,245 | |||||||||||
| Other costs | (5 | ) | 1 | ||||||||||
| Adjusted EBITDA | $ | (15,971 | ) | -14.6 | % | $ | 46,290 | 15.5 | % | ||||
| The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown: | |||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | ||||||||||||
| November 1, 2020 | November 3, 2019 | ||||||||||||
| Operating income (loss) | $ | (56,043 | ) | -51.4 | % | $ | 6,499 | 2.2 | % | ||||
| Add back: General and administrative expenses | 11,746 | 16,210 | |||||||||||
| Depreciation and amortization expense | 34,384 | 33,340 | |||||||||||
| Pre-opening costs | 2,570 | 4,245 | |||||||||||
| Store operating income (loss) before depreciation and amortization | $ | (7,343 | ) | -6.7 | % | $ | 60,294 | 20.1 | % | ||||
| DAVE & BUSTER'S ENTERTAINMENT, INC. | |||||||||||||
| Consolidated Statements of Operations (Unaudited) | |||||||||||||
| (in thousands, except share and per share amounts) | |||||||||||||
| 39 Weeks Ended | 39 Weeks Ended | ||||||||||||
| November 1, 2020 | November 3, 2019 | ||||||||||||
| Food and beverage revenues | $ | 119,268 | 37.3 | % | $ | 410,779 | 40.8 | % | |||||
| Amusement and other revenues | 200,423 | 62.7 | % | 596,754 | 59.2 | % | |||||||
| Total revenues | 319,691 | 100.0 | % | 1,007,533 | 100.0 | % | |||||||
| Cost of food and beverage (as a percentage of food and beverage revenues) | 32,667 | 27.4 | % | 109,072 | 26.6 | % | |||||||
| Cost of amusement and other (as a percentage of amusement and other revenues) | 21,997 | 11.0 | % | 64,456 | 10.8 | % | |||||||
| Total cost of products | 54,664 | 17.1 | % | 173,528 | 17.2 | % | |||||||
| Operating payroll and benefits | 85,197 | 26.6 | % | 239,965 | 23.8 | % | |||||||
| Other store operating expenses | 229,137 | 71.8 | % | 321,334 | 31.9 | % | |||||||
| General and administrative expenses | 35,587 | 11.1 | % | 49,047 | 4.9 | % | |||||||
| Depreciation and amortization expense | 104,896 | 32.8 | % | 97,226 | 9.6 | % | |||||||
| Pre-opening costs | 8,781 | 2.7 | % | 15,970 | 1.6 | % | |||||||
| Total operating costs | 518,262 | 162.1 | % | 897,070 | 89.0 | % | |||||||
| Operating income (loss) | (198,571 | ) | -62.1 | % | 110,463 | 11.0 | % | ||||||
| Interest expense, net | 22,491 | 7.0 | % | 14,771 | 1.5 | % | |||||||
| Loss on debt refinance | 904 | 0.3 | % | - | 0.0 | % | |||||||
| Income (loss) before provision (benefit) for income taxes | (221,966 | ) | -69.4 | % | 95,692 | 9.5 | % | ||||||
| Provision (benefit) for income taxes | (71,777 | ) | -22.4 | % | 20,411 | 2.0 | % | ||||||
| Net income (loss) | $ | (150,189 | ) | -47.0 | % | $ | 75,281 | 7.5 | % | ||||
| Net income (loss) per share: | |||||||||||||
| Basic | $ | (3.56 | ) | $ | 2.19 | ||||||||
| Diluted | $ | (3.56 | ) | $ | 2.15 | ||||||||
| Weighted average shares used in per share calculations: | |||||||||||||
| Basic shares | 42,185,163 | 34,405,503 | |||||||||||
| Diluted shares | 42,185,163 | 35,042,311 | |||||||||||
| Other information: | |||||||||||||
| Company-owned stores open at end of period | 137 | 134 | |||||||||||
| Store operating weeks in the period | 2,682 | 5,012 | |||||||||||
| The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown: | |||||||||||||
| 39 Weeks Ended | 39 Weeks Ended | ||||||||||||
| November 1, 2020 | November 3, 2019 | ||||||||||||
| Net income (loss) | $ | (150,189 | ) | -47.0 | % | $ | 75,281 | 7.5 | % | ||||
| Add back: Interest expense, net | 22,491 | 14,771 | |||||||||||
| Loss on debt refinance | 904 | - | |||||||||||
| Provision (benefit) for income taxes | (71,777 | ) | 20,411 | ||||||||||
| Depreciation and amortization expense | 104,896 | 97,226 | |||||||||||
| EBITDA | (93,675 | ) | -29.3 | % | 207,689 | 20.6 | % | ||||||
| Add back: Loss on asset disposal | 541 | 1,284 | |||||||||||
| Impairment of long-lived assets | 13,727 | - | |||||||||||
| Share-based compensation | 5,344 | 5,479 | |||||||||||
| Pre-opening costs | 8,781 | 15,970 | |||||||||||
| Other costs | 54 | 34 | |||||||||||
| Adjusted EBITDA | $ | (65,228 | ) | -20.4 | % | $ | 230,456 | 22.9 | % | ||||
| The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown: | |||||||||||||
| 39 Weeks Ended | 39 Weeks Ended | ||||||||||||
| November 1, 2020 | November 3, 2019 | ||||||||||||
| Operating income (loss) | $ | (198,571 | ) | -62.1 | % | $ | 110,463 | 11.0 | % | ||||
| Add back: General and administrative expenses | 35,587 | 49,047 | |||||||||||
| Depreciation and amortization expense | 104,896 | 97,226 | |||||||||||
| Pre-opening costs | 8,781 | 15,970 | |||||||||||
| Store operating income (loss) before depreciation and amortization | $ | (49,307 | ) | -15.4 | % | $ | 272,706 | 27.1 | % | ||||
For Investor Relations Inquiries:
Scott Bowman, CFO
Dave & Buster’s Entertainment, Inc.
972.813.1151
scott.bowman@daveandbusters.com